Reorganization of State Enterprises (without Privatization)

Bankruptcy is an inability of a legal entity – agent of entrepreneurial activity due to lack of liquid assets to satisfy claims submitted by creditors within the specified period and fulfill its liabilities to the budget. Article 1 of the Law of Ukraine “On Bankruptcy” of 14 April 1992 No 2343-XII Sanation in Ukrainian legislation is defined as procedure for submission of proposals by the interested parties to satisfy creditor claims brought against the debtor through debt repayment and fulfill liabilities of the debtor to the budget and make factual repayment of pecuniary liabilities of the debtor through transfer of debt to the sanator (replacement of the debtor). In case the creditors express their agreement to the sanation (replacement of the debtor), the arbitration court issues resolution on termination of bankruptcy proceedings, which approves conditions of sanation of the debtor.

The sanation mechanism was not developed during the term of the Law of Ukraine “On Bankruptcy”. However, this gap in the legislation was bridged by Explanations of the Higher Arbitration Court of Ukraine of 18 November 1997 No 02-5/444.

Starting 1 January 2000 new edition of the Law “On Bankruptcy” of 30 June 1999 No 784-XIY came into effect. This edition significantly amended and modified the Law (even the title of the law was changed to the Law “On Re-establishment of the Debtor’s Solvency or Declaration of Its Bankruptcy”).